Worried by the uncontrollable surge in building materials prices, which is pushing contractors into financial distress, the Nigerian Institute of Quantity Surveyors (NIQS) has called on the government to step into the situation with strategic interventions that will engender stability in the construction sector and safeguard the interests of all stakeholders.
Among other suggestions, the group wants the government to discourage oligopolies, and cartels in the construction materials manufacturing industry, making a case for perfect competition that will align local production prices with international standards.
“The government should incentivise market entry for new producers into the construction material production space by lowering licensing requirements. This is in a bid to boost competition and drive down prices of basic construction materials like cement,” NIQS President, Kene C. Nzekwe, said while addressing journalists.
According to him, the hyperinflation of prices has hurt the construction industry to the extent that prospective clients could no longer afford construction projects, forcing many projects to stall.
Speaking on: “Impact of Hyperinflation on Nigeria Construction Industry: Urgent Need for Government Intervention for Stabilizing Construction Costs in Nigeria,” Nzekwe pointed out that the repercussions of the uncontrollable surge in construction materials prices have extended beyond stalled projects and impeded the development of crucial infrastructure such as roads, hospitals, and educational facilities.
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“The repercussions are dire, disrupting economic projections and compelling government planners into uncharted territory. The construction industry, a cornerstone of our economy, is bearing the brunt of this hyperinflationary crisis.
“The price of cement, using a 50kg bag as an indicator, between January 2024 and February 2024, a period of about six weeks, has increased from N4,500 to between N12,000 and N13,000.
“This is an increase of between 100 per cent to 150 per cent. Reinforcement steel rods, another major material for construction moved from around N590,000 and N650,000 per ton as of January 2024 to N1,200,000 and N1,400,000 as of February 2024, an increase of over 100 per cent in a short run of less than six weeks,” he said.
Why tasking the government with strategic interventions for stability, Nzekwe said that, due to the hyperinflation of construction materials’ cost, private sector investors have also been reluctant to invest, creating an adverse cycle that hampered economic growth and job losses in the construction industry.
“As we witness this economic storm, we must rally together to navigate these turbulent times and secure the stability of the construction industry, a critical engine of our nation’s growth,” he said.
He identified the government’s budget deficits, fuel subsidy removal, currency float, and insecurity, affecting productivity and leading to moribund industries as the root cause of the hyperinflation that is almost crippling the construction sector and the entire economy.
Suggesting solutions to mitigate the impacts of hyperinflation in the construction industry, the NIQS president urged the government to engage local construction materials manufacturers to bring down the prices.
Nzekwe also urged the government on the need to understand and address some of the challenges confronting local construction materials manufacturers
“Some of the challenges highlighted by the local manufacturers include exchange rate volatility which has seen our currency depreciate by about 300 per cent in a few months, thereby affecting the imported components of their manufacturing like spare parts, mining explosives and import tariff which is indexed in US Dollars,” the NIQS boss said
Enumerating the importance of the industry, he said the construction sector in the Nigerian economy played a vital role in the provision of commercial, industrial, and infrastructural projects.
“It attracts many investments and thereby contributes substantially to the GDP.
“The construction industry was reported to have contributed up to 11.79 per cent to the nominal GDP in the first quarter of 2023. This shows how important the construction industry is to the Nigerian economy and the need for all stakeholders to protect this important industry.
“A growing construction industry brings about positive multiplier effects, gross fixed capital formation and growth in the gross domestic product(GDP) of the economy.
“The government should therefore be interested in what is happening in the construction industry of the economy because the sector is an effective barometer which can be used to measure the direction of economic growth within the economy,” the NIQS president said.
